Is it possible to interactively control/manipulate objects in Blender Internal/Cycles to have more realistic physics simulations?
You are confusing physics, rendering and interaction, which are three different worlds in a 3d package like blender. If you want interaction then you need to use any game engine like unreal, optimized to calculate simulations (based on assumptions) as well as additional interactions in real-time. 

However, with that benefit of having a real-time simulation, you obviously forfeit simulation quality and especially image quality. Notice that even in a game engine, the simulation of physics only means object interaction and is another thing as how all the meshes are calculated to a final image.